The Globe and Mail

Go to the Globe and Mail homepage

Jump to main navigationJump to main content

Globe Investor

News Sources

Take control of your investments with the latest investing news and analysis

Press release from CNW Group

Sterling Resources Announces Third Quarter Operating And Financial Results

Tuesday, November 22, 2011

Sterling Resources Announces Third Quarter Operating And Financial Results17:00 EST Tuesday, November 22, 2011CALGARY, Nov. 22, 2011 /CNW/ - Sterling Resources Ltd. (TSX-V:SLG)("Sterling" or the "Company") an international oil and gas company with exploration and development assets in the United Kingdom, Romania, France and the Netherlands, announces interim operating and financial results for the quarter ended September 30, 2011. Unless otherwise noted all figures contained in this report are denominated in Canadian dollars.The same accounting policies and methods of computation were followed in the preparation of the financial statements for the three and nine months ended September 30, 2011 as were followed in the preparation of the financial statements for the first quarter ended March 31, 2011, and the six and three month periods ended June 30, 2011. In addition, the financial statements year-to-date 2011 contain certain incremental annual International Financial Reporting Standards (IFRS) disclosures not included in the annual financial statements for the year ended December 31, 2010 which were prepared in accordance with Canadian GAAP.For the three months ended September 30, 2011 the Company recorded a net loss of $7.8 million ($0.04 per share) compared with a net loss of $10.2 million ($0.07 per share) for the three months ended September 30, 2010. For the nine months ended September 30, 2011 the Company recorded a net loss of $43.8 million ($0.22 per share) compared with a net loss of $17.9 million ($0.13 per share) for the nine months ended September 30, 2010.During the second quarter the Company made provision for a bad debt of $6,792,000 against recovery of an overdue amount receivable from a co-venturer in the unsuccessful Grian well on Block 48/28b in the UK Southern North Sea. For the nine months ended September 30,2011 the Company expensed dry hole costs of $9,733,000 relating to the unsuccessful Grian exploration well, while during the first nine months of 2010 dry hole costs of $8,747,000 were expensed relating to wells at Airidh and Macanta in the UK.There were no dry hole costs incurred during the third quarter of 2011, while during the third quarter of 2010 dry hole costs of $4,670,000 were incurred relating to the Macanta well in the UK.During the third quarter of 2011 pre-license and other exploration costs of $1,881,000 were comparable to the $1,987,000 incurred during the third quarter of 2010, with most of these costs related to Company development assets. However, during the nine month period ended September 30, 2011, pre-license and other exploration costs of $9,032,000 were $2,657,000 higher than those incurred during the first nine months of 2010.  Most of this increase was attributable to the initial costs and purchase of seismic data associated with the commencement of operations in the Netherlands during the first quarter of 2011. The Company expects to drill a well in the Netherlands during the fourth quarter of 2011.Cash and cash equivalents at September 30, 2011 were $58.0 million compared to $142.6 million as at December 31, 2010.  Net working capital was $64.7 million at September 30, 2011 compared to net working capital of $138.4 million at December 31, 2010. Net working capital levels have declined since year-end 2010 as a result of operational activities at Breagh, Cladhan and Grian, however this level of working capital is up significantly over that at the end of the second quarter as a result of the drawdown of the Breagh credit facility and the equity issue in August 2011.In mid-July Sterling Resources (UK) Ltd., a wholly owned subsidiary of Sterling, signed an agreement with a syndicate of banks for a £105 million senior secured loan to finance phase one of the Breagh gas field. The debt facility has a maximum term of 6.5 years and is composed of a main tranche of £95 million and a contingency of a further £10 million. In late July the Company entered into a bought deal financing agreement with a syndicate of underwriters to issue 32,143,000 common shares at a price of $1.40 per share.  The primary purpose of this bought deal financing was to meet the liquidity threshold required as a condition of finalizing the £105 million senior secured loan. Total net proceeds of the bought deal financing after deducting underwriter fees and other expenses were approximately $42.5 million with the offering closing on August 16, 2011.During the nine months ended September 30, 2011 capital expenditures on development, exploration and evaluation activities totaled $143.7 million.  Construction of the Breagh platform jacket, topsides, pipeline and onshore facilities accounted for $101.2 million of this total and the platform was put in place in mid-October. Cost of the four well drilling campaign at Cladhan during the spring of 2011 totaled nearly $27.0 million and pre-development work for Cladhan has commenced with regulatory approval anticipated during 2013 and first production expected in 2014. Earlier in the year an unsuccessful exploratory well 48/28b-2 was drilled at Grian in the UK North Sea at a total cost of $9.7 million. In addition, a successful appraisal well 42/13a-6 at East Breagh was drilled earlier in the year, which enhanced the size and scope of the Breagh field, at a cost to Sterling of $5.7 million.In early September Sterling's wholly owned subsidiary Sterling Resources Netherlands B.V. signed a farm-out agreement with Petro Ventures Netherlands B.V. covering its licenses within the F-Quad and L-Quad offshore Netherlands. Subject to regulatory and partner approval, Sterling Resources Netherlands B.V. as operator will now hold a 25 percent working interest in the shallow parts of four blocks (F14, F16, F17a, and F18) in the F-Quad and L01b in the L-Quad. The blocks currently hold four oil discoveries and an appraisal well will be spudded in block F17 around the end of November.Subsequent to the end of the third quarter, the Company announced that the Romanian government rescinded the construction permit law in relation to offshore development, as a result of which impediment the Company had declared force majeure on April 28, 2011 on its Midia and Pelican Blocks in the Black Sea.  Following this positive news we were also pleased to announce in late October that the Company had reached agreement with the Government of Romania on a package of issues that will resolve the Notice of Dispute filed on June 20, 2011.  Agreement was reached to grant assignments to Sterling's designated partners and it was confirmed that all of Sterling's offshore licenses will now run until May 2014, with two additional, three year renewal terms also being available under the Concession Agreement signed in August 2007.Commenting on the interim results, Mike Azancot, Sterling's President and CEO said, "In spite of extreme market volatility and capital markets uncertainty during the third quarter we were pleased to finalize the Breagh loan facility, ensuring that the Breagh project remains on track for first gas production in mid 2012. We were also delighted that during October and November certain major issues in Romania were resolved, enabling Sterling to resume work activities and investments on the highly attractive licenses in the Black Sea. As the year 2011 comes to a close we will now focus upon drilling an appraisal well in Block F17 of the F-Quad in offshore Netherlands and look forward to an exciting program of work in 2012."Sterling Resources Ltd. is a Canadian-listed international oil and gas company headquartered in Calgary, Alberta with assets in the United Kingdom, Romania, France and the Netherlands. The shares are listed and posted for trading on the TSX Venture Exchange under the symbol "SLG".Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this releasee.Filer Profile No. 00002072Forward-Looking StatementsAll statements included in this press release that address activities, events or developments that Sterling expects, believes or anticipates will or may occur in the future are forward-looking statements. In addition, statements relating to reserves or resources are deemed to be forward-looking statements as they involve the implied assessment, based on certain estimates and assumptions that the reserves and resources described can be profitably produced in the future.These forward-looking statements involve numerous assumptions made by Sterling based on its experience, perception of historical trends, current conditions, expected future developments and other factors it believes are appropriate in the circumstances.  In addition, these statements involve substantial known and unknown risks and uncertainties that contribute to the possibility that the predictions, forecasts, projections and other-forward looking statements will prove inaccurate, certain of which are beyond Sterling's control, including: the impact of general economic conditions in the areas in which Sterling operates, civil unrest, industry conditions, changes in laws and regulations including the adoption of new environmental laws and regulations and changes in how they are interpreted and enforced, increased competition, the lack of availability of qualified personnel or management, fluctuations in commodity prices, foreign exchange or interest rates, stock market volatility and obtaining required approvals of regulatory authorities. In addition there are risks and uncertainties associated with oil and gas operations.  Readers should also carefully consider the matters discussed under the heading "Risk Factors" in the Company's Annual Information Form.Undue reliance should not be placed on these forward-looking statements, as there can be no assurance that the plans, intentions or expectations upon which they are based will occur.  Sterling's actual results, performance or achievements could differ materially from those expressed in, or implied by, these forward-looking statements. These statements speak only as of the date of the press release. Sterling does not intend and does not assume any obligation to update these forward-looking statements except as required by law.Financial outlook information contained in this press release about prospective results of operations, financial position or cash flows is based on assumptions about future events, including economic conditions and proposed courses of action, based on management's assessment of the relevant information currently available. Readers are cautioned that such financial outlook information contained in this press release should not be used for purpose other than for which it is disclosed herein.For further information: visit www.sterling-resources.com or contact: Mike Azancot, President and Chief Executive Officer, Phone 44-20-3008-8487, Mobile: 44-7740-432883, mike.azancot@sterling-resources.com David Blewden, Chief Financial Officer, Phone: 44-20-3008-8489, Mobile: 44-7771-740804, david.blewden@sterling-resources.com George Kesteven, Manager, Corporate and Investor Relations, Phone: (403) 215-9265, Mobile: (403) 519-3912, george.kesteven@sterling-resources.com